Pushing Chesapeake on governance, by proxy and fax

May 11 (Reuters) - One of the earliest critics of Chesapeake Energy Corp is a 70-year-old Denver investor with no patience for e-mail.

Armed instead with just a telephone and a fax machine, Gerald Armstrong pushed for corporate governance changes at the Oklahoma energy company long before the recent attention on the oversight of its founder and Chief Executive Officer, Aubrey McClendon.

In 2008 and 2009, Armstrong convinced a majority of Chesapeake shareholders to back proposals for annual elections of directors, something he said would make them more accountable.

After those votes, Oklahoma adopted a law that effectively undermined his victories. Now, Armstrong is at it again, asking company stockholders to approve in June a measure to reincorporate Chesapeake in Delaware, which would render the Oklahoma law irrelevant.

Armstrong expects that the measure to reincorporate Chesapeake in Delaware will gain favor with big institutional investors in light of the current furor following Reuters reports revealing McClendon has taken out loans worth $1.5 billion to fund his participation in a Chesapeake well drilling incentive plan.

"Aubrey McClendon is not walking on water," Armstrong said.

One supporter of changing where Chesapeake is incorporated is New York State Comptroller Thomas DiNapoli, who oversees about $140 billion in state pension funds, a spokesman said.

Armstrong hopes other big investors will follow suit and the influential Council of Institutional Investors mentioned the proposal favorably in a recent newsletter.

Asked about Armstrong and the push to reincorporate Chesapeake in Delaware, a Chesapeake spokesman referred to language in the company's proxy. In that regulatory filing, Chesapeake argued there are business advantages for the natural gas company if it remains incorporated in Oklahoma and that its current structure has its own governance benefits such as making it easier to defend against a hostile takeover bid.

Armstrong is part of a loose network of independent shareholder activists who file scores of proxy measures every year. Many of these proposals are not adopted, but over time the measures can send a message.

Research firm FactSet SharkRepellent found that Armstrong filed 66 shareholders proposals in 2010 and 27 in 2011. In both years, his proposals on average received about 52 percent support among the votes cast.

Armstrong speaks with an emphasis on detail that shows his background in business as president of a Colorado land company from 1973 to 2006. Since he often targets smaller companies, he is not as well-known as other sha reholder activists suc h as Evelyn Davis. Also working against his notoriety is the dislike he developed for e-mail when he tried it.

"I got so much junk!" he says.

Armstrong owns 900 shares of Chesapeake. He says he started buying the shares in 2005, when they cost around $30 per share, and he thought they were poised to rise. That happened for a while, but now they are trading around $17.

"It looks like a diminishing return at this point," he said.

Chesapeake makes up less than 1 percent of his total portfolio, which is concentrated on smaller companies.

Unlike so-called "socially responsible investors," Armstrong says he only buys stocks he thinks are good investments and only gets involved in proxy efforts when changes seem necessary. Often, Armstrong does not travel to shareholder meetings, but enlists others to speak for his proposals.

Armstrong says he only wants to improve the way companies are run.

"I'm not a troublemaker," he says. Company managements "make the trouble."